Air Deccan founder may lose it all, even his house

Air Deccan founder may lose it all, even his house

"The exhilaration lies in building and creating. I am embarking all over again on another great journey... there is great adventure in store for the future."

These are great lines with which Gorur Ramaswamy Gopinath concludes his autobiography, Simply Fly.

The writer had launched India's first low-cost airline, Air Deccan, in 2003, and the "great journey" he was referring to was the taking-off of his next venture, Deccan 360, India's first dedicated cargo airline, and Deccan Cargo and Express Logistics, an express cargo and logistics company.

That was May 2009, but the spirit of unquenchable optimism and zest was similar to the days of 2003, when Air Deccan was launched and the history of Indian aviation rewritten.

Four years later, notices have appeared in major dailies across India. One invites bids for 54,000 shares of Deccan Cargo and Express Logistics held by State Bank of India as collateral for 9,000 ft of commercial space in central Bangalore.

Another calls attention to the sale on Thursday of "all that piece and parcel of the property presently bearing Corporation No 32, Vittal Mallya Road... belonging to Smt Bhargavi Gopinath W/o Capt. GR Gopinath" or, in other words, the Gopinaths' beautiful residence in the heart of the city.

Air Deccan founder may lose it all, even his house

SBI executives in the e-auctions department later confirmed that the auction of the residence has been postponed because no bids were received. They added that the bank may reinvite bids for the property.

Gopinath will now probably have to add another chapter to his book.

Business Standard has reported that the company owes close to Rs 500 crore (Rs 5 billion) to various banks, of which the debt to State Bank of India alone is Rs 211 crore (Rs 2.11 billion).

SBI executives confirm that the funds raised by auctioning the assets that Gopinath had pledged with the bank will not be sufficient to cover his dues.

In 2009, when he unsuccessfully contested a Lok Sabha seat from Bangalore, Gopinath's affidavit showed that he had personal assets of Rs 66 crore (Rs 660 million) and liabilities at Rs 2 crore (Rs 20 million), according to National Election Watch.

Air Deccan founder may lose it all, even his house

Deccan Cargo and Deccan 360 were supposed to have gone through corporate debt restructuring but the companies have not, say sources in SBI - the banks will, in all probability, have to take the hit, though discussions are still on.

Gopinath is said to have invested Rs 75 crore (Rs 750 million) and Reliance Industries another Rs 115 crore (Rs 1.15 billion) in the ill-fated company which ceased operations in 2011.

Deccan Shuttle, a regional service to connect various towns in Gujarat by air, which had been started in August 2012, also shut shop earlier this year.

Before its sale to Kingfisher Airlines, which netted Gopinath Rs 550 crore (Rs 5.5 billion), Air Deccan had been bleeding heavily.

It posted a loss of Rs 213 crore (Rs 2.13 billion) in the quarter ending on March 31, 2007 on a net income of Rs 437 crore.

Indeed, according to a report in Mint, JP Morgan Chase analyst Peter Negline had written in a note to investors, "If they (Air Deccan) cannot find private equity to inject funds immediately, we believe that their departure from the market is imminent."

Air Deccan founder may lose it all, even his house

One is naturally tempted to ask: What has gone wrong each time to transform a laudable dream into a bubble that eventually bursts? And what does the incorrigible entrepreneur plan to do next?

He had, after all, written that he "tapped into an unknown inexhaustible well of optimism and energy to get up each time after falling, summon strength and courage and start all over again."

To answer these questions, the 61-year-old son of a village school teacher promises to meet but reneges repeatedly, pleading a hectic schedule.

Those who knew him well, in different capacities, paint the picture of a man with great ideas, but who has been let down, sometimes by the people he employed, or sometimes by as simple a fact as not having a tight enough rein on finances.

Visionary is a term that crops up often if you are discussing Gopinath. And it is a tag not unwarranted - after all, how many silkworm farmers even harbour dreams of becoming aviation entrepreneurs?

Air Deccan founder may lose it all, even his house

HL Rikhye, who joined as CEO of Deccan 360, recalls his first meeting with the ever-smiling, bespectacled businessman in 2009.

"He explained his vision, that the company would be the FedEx of India and that it would connect over 600 cities veritably overnight. I was quite impressed and agreed to come on board, even though I had never considered shifting from Delhi."

Like with Air Deccan, Gopinath had big plans for his express logistics venture, the seeds of which were sown when he realised it was easier to fly in an aircraft engine from Singapore than transfer it within the country.

"My vision is to make Deccan 360 ubiquitous. It must be present across the length and breadth of the country. If someone wants to set up a factory in a remote corner of Tamil Nadu, he should be able to do it because of Deccan 360," he had said in an interview.

To another publication, he had said, "My goal is to connect 75 cities in India to each other on a 24-hour delivery schedule within the next year." For the man who made the aam aadmi fly with Rs 1 tickets, no dream was too big.

But the express cargo venture, which was to pioneer the hub-and-spoke model favoured by FedEx in India using Nagpur as the central hub, folded up within two years of its launch.

Air Deccan founder may lose it all, even his house

"He had great vision but he did not have the right people. He appointed as franchisees people without prior knowledge of the sector. Handling cargo is not like selling soap, but that's how others treated it," says P Shanmugam, CMD of Coimbatore-based Shaan's Cargo, which has been in the cargo business for over two decades, and a Deccan 360 franchisee for a year before pulling out.

Rikhye's experience was not dissimilar. "He had tremendous energy but he did not have the right people to execute his vision," he says.

While the plan for an express cargo and logistics company was good in theory, it clearly faltered in execution, due to a variety of reasons.

"The aircraft that the company had procured was not suitable for short-haul domestic flights. And in a logistics- environment, you must have exceptionally good pick-up and delivery, otherwise you will fail," says Rikhye, who set up his own aviation consultancy after quitting.

Nevertheless, Rikhye stayed on till 2011 and by deploying the three Airbus A310s on long-haul international flights, he was able to take revenue figures from Rs 1 crore (Rs 10 million) a month to Rs 15 crore (Rs 150 million) a month.

Air Deccan founder may lose it all, even his house

Instead of taking things slow after this, Gopinath continued to be a man in a hurry and, armed with the spurt in revenue, approached the banks to extend credit of Rs 500 crore (Rs 5 billion).

Again, this was not unusual for the serial entrepreneur who, when faced with predatory pricing of Indian Airlines and Jet Airways, decided that the only recourse for Air Deccan to survive was to expand at "breakneck" speed by acquiring and deploying a mind-boggling 60 aircraft.

Going back further, to the days when Air Deccan was still on the drawing board, Gopinath had written, "I began preparing a blue-print for Deccan but still did not ask 'How much will the project cost?'... Money, I was certain, would be the least of my problems."

Perhaps it was not, in the beginning, but in a cash-guzzling industry like aviation, it soon became one, especially for Deccan 360.

Though the company managed to raise the required Rs 500 crore from banks, it soon ran through that money, says Rikhye, who cites revenue mismanagement as another reason why the venture failed.

Mohandas Pai, chairman of Manipal Global Education, who has known Gopinath for a number of years and even contributed to his 2009 election campaign, adds that financial discipline is one area where Gopinath could improve.

Air Deccan founder may lose it all, even his house

Also, Gopinath's first aviation company, helicopter charter venture Deccan Charters, is still afloat as is another entity that maintains aircraft for corporations.

Deccan Charters had tied up with Taj Air and BJETS in February 2011 to launch a joint venture, Power Fly, which utilises the combined fleet of the three for charter services as well as agreements for marketing, maintenance and operational support.

Taj Air confirms that the joint venture is still operational. And last year, Gopinath had told a financial daily that he planned to launch another low-cost carrier after his non-compete agreement with Vijay Mallya ends in January 2013, though the civil aviation ministry is reportedly not enthused by the proposal.

It would be worth waiting to see what rabbit the maverick entrepreneur pulls out of his hat next.

As Pai puts it, "The question is not whether he will launch an enterprise but whether the new enterprise will succeed. And that's something only Gopinath can answer."